Are you expecting too much from your housing market?

By Kimberly GreeneFont size :

Point2Homes recently analyzed home buying search behaviour on their website, which was the result of six million browsing sessions. What they found was a surprising profile of the Canadian home buyer: Home buyers are looking for homes that are bigger and at lower price points than what their average housing markets boast.

The average home price in Canada in July 2016 was $480,743. The most popular price point on the Point2Homes’ website, however, is between $300,000 and $400,000. That comparison is fairly simplistic, as the housing markets in Canada very widely in both price and availability. Looking at specific housing markets, however, the trend continues. In Toronto, buyers were searching for homes priced up to $400,000, well below the average home price of $709,825. In Vancouver, where the average home price is $914,393, the most popular search is for homes priced up to $750,000. Tired of hearing about Toronto and Vancouver? Let’s look further afield, then. The majority of home searches in Hamilton, a city about an hour west of Toronto, were for homes around $300,000, when the average home price there is $495,139. And in Calgary, where the average home price is $485,114, one third of people searched for homes that hovered in the area of $400,000.

Real estate is one of the biggest supporters of the Canadian economy today, and because of this, it’s hard to ignore the amount of media coverage that’s been given to Canadian housing markets over the course of the past year – especially if you’ve been interested in buying a home. So what’s going on here? Why are buyers so detached from the reality of their housing markets?

“A lot of people grew up in a very different time than it is today,” said Ben Myers, senior vice president, market research and analytics at Fortress Real Developments. “A lot of times when their parents bought their homes, there was just a lot more land available. A lot more land available means that land prices are lower and essentially, home prices are lower. So it’s just a very different situation.”

It may very well be that house hunters are looking for a diamond in the rough, a fixer-upper, a steal of a deal. But the discrepancy doesn’t end at price; people are looking for larger homes as well. Less than a quarter of searches were for homes with 1-2 bedrooms. 31 per cent of people searching for homes wanted a property with four or more bedrooms – and that search was nationwide. Almost half of searches for Alberta homes, for instance, were for homes of four or more bedrooms.

Simply put, people are wanting more house for less money, in housing markets that don’t support what people are searching for. Putting aside the fact that many people are finding affordability a big problem in certain cities, would-be home buyers are looking for properties that just aren’t there, and this gap between expectation and reality is influencing some of the housing issues that we’re seeing across the country.

Rather than accept the reality of higher populations and higher prices of land and looking into alternative options for homes to purchase, home searchers in parts of the country have been staying put, while continuing to look for something that doesn’t exist.

“They’ll stay with mom and dad until they can afford that single detached home, which to me is crazy,” Myers says.

The proverbial Canadian home ownership dream is tied into the love of the single detached home, and somehow it’s translated into expecting to be able to buy a detached, single-family home for $400,000 in one of Canada’s largest cities. But cities, after all, are much more densely populated, and the cost of land and lack of space on which to build means that housing must go up, not out. Condominiums are much more prevalent in cities than in suburbs, and are long-thought to be the type of housing for the single home buyer, the person who needs a bit of a stepping stone to get to their single family home. But Myers says that increasingly, investors – and not necessarily foreign – are the buyers of these spaces.

“They’re having a lot of success in renting them out, so I think we’re starting to see a little bit of a shift in the marketplace where young people are not buying the condominiums, they’re just renting the condominiums.”

Myers thinks that changing the perspective of condo living can change expectations for various housing styles in each market.

“I think what needs to happen is for [cities] to make it more appealing for families to live in condominiums, and developers do that as well,” he says. “Right now we’re really just catering to investors . . . but there’s just not a lot of that larger product that can cater to a family.”

One reason why people are searching for bigger homes is because they tend to expand their families as they get older and so they want more space, but a single-family home isn’t necessarily the only way to get it. Myers says that he’s been speaking with a lot of realtors lately, and based on those conversations as well as the interest he’s seen in particular types of developments, buyers are beginning to open their minds to other types of housing apart from single-family homes and condominiums.

“We’re starting to see a little more acceptance of the stacked townhome concept. They still feel that they’re getting that piece of dirt where they feel that they can walk up to it as opposed to going through the concierge, get into an elevator. They’re a little bit more close to that low-rise lifestyle.”

Because more and more buyers are looking at these low-rise options as alternatives to single-family detached homes, investors are starting to show more interest in them, and more developers are starting to build more of them.

Not all areas have this problem of expectations not aligning with reality, though. From the Point2Homes data, “64% more home buyers in Quebec were searching for 2-bedroom homes compared to home buyers in Alberta; compared to Saskatchewan, the difference is even bigger — 78% more people are looking for 2-bedroom homes.”

If you’re serious about your home search, one of the most important things you will do apart from saving money and preening your credit is learning the housing market where you want to live. You can’t expect to buy the same home in downtown Ottawa as you would in the outskirts of Winnipeg – not for the same price, anyway. At the end of the day, a realtor will be able to help you understand the types of homes that are available in your marketplace, what price sellers want for those homes, and what price those homes ultimately fetch. And – as tough as it may be – that may mean giving up the dream of your single-family detached home, at least for now.

“There’s really gonna be no such thing as a first-time buyer single detached product unless you want to move way out,” Mysers says. “Single [detached homes], in the new market, are starting to very much become an affluent product.”

Point2Homes is a real estate search portal. Its overall traffic has increased 39 per cent year-over-year, which translates into 137 million page views since the beginning of the year. Canadian overall traffic is up by 71 per cent.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate